When Government Competes Against the Private Sector, Everybody Wins â€” The Atlantic

And he issued a challenge to the cityâ€™s unions: If you donâ€™t like my plans, come up with another way to save as much taxpayer money. Â

And so they did.Â My favorite example:Â Construction workers repairing sidewalks were working the standard eight-hour shifts, five days per week. Pouring a load of cement, though, takes about five hours to complete, meaning they could only pour one load per day, or five per week. If the city went to a 10-hour, four-days-per-week schedule, however, as the unions suggested, the crews could pour two loads per day, eight per weekâ€”a 60 percent increase in productivity at no additional cost and with savings on fuel and equipment rental.

Under the leadership of Jorge Ramirez, the unions worked with my firm to developÂ a plan to save $242 million a year. It included many proposals like the new schedule for pouring sidewalks.Â But the whole plan started with $40 million from something called â€śmanaged competition,â€ť in which public employees compete against private-sector firms for contracts to provide government services. Â

Chicago is not alone in pursuing managed competition. It is ubiquitous in the United Kingdom, which has had at least 3,500 such competitions. In this country, cities including Phoenix, Charlotte, Indianapolis and Philadelphia have pursued managed competition as a strategy for cutting cost and improving service. Â

The Phoenix trash-hauling operations have become legendary as the fountainhead of managed competition. In the late 1970s, the city decided to outsource trash collection, splitting the city into several zones for bidding purposes. But first, it compared the private bids received to what could be achieved in-house. City employees proposed business as usual, so the in-house benchmark wasnâ€™t at all competitive and the first zone was outsourced. Stung by the resulting privatization, the cityâ€™s workers realized they needed to adopt new practices and new equipment, introduce greater flexibility on wages and working conditions, and seek professional guidance. The public employees succeeded in winning the competitions for the remaining four zones, and even eventually won back the contract for the zone they initially lost.